Ancillary businesses support tech boom

Student Sherif Matar (right) goes over his final project he did for the cookie company ‘Modern Bite.’ (Paul Alvarez Jr., editor@smdp.com)

SILICON BEACH ‚Äî You can’t actually see Santa Monica on Represent.LA, the website that maps the L.A.-area tech startup world, because it is completely covered by hundreds of pins, each indicating a business. The pins spread south to Venice and are scattered in a healthy strip to Downtown Los Angeles.

In Santa Monica, most of the pins are purple, representing startups themselves, but many are brown (consultants), green (investors), orange (accelerators) or some other color and business that is supporting but not actually creating the next hot (or failed) app.

And for all of Represent.LA’s depth, it doesn’t chart the lawyers, accountants, or creative office space brokers who work primarily with tech startups.

It’s a cynical analogy; in a business landscape where meteoric successes sometimes mean a company leaves the city for a larger space (see Sony’s Santa Monica Studio, IMAX, or Riot Games) and wipe-outs are common, these companies provide needed stability.

City Hall wants both types, said Economic Development Manager Jason Harris, and they have a good balance.

“We do not have specific examples of one type being more economically advantageous than the other,” he said in an e-mail. “My personal sense is the turn over and churn of startup activity may generate more business activities to those businesses servicing that industry such as real estate, utilities, professional service, etc. for the establishment of utility service, leasing of space, etc.”

Startups often take years to become profitable and a business’ profitability does translate to a higher business license tax paid to City Hall.

“It is driven by both the startups and the workforce that is located in the community and is supported by the venture capitalists,” he said.

“A lot of these ancillary companies know what they want,” said Randy Starr, a creative office space broker with Avison Young. “They’ll fill out their exact space. They know who their principals are. They’ll sign a 10-year deal and they’re set. They don’t have to worry about growth.”

Ancillary companies want to be in Santa Monica, he said, so that the CEOs and CFOs of the startups can walk to their businesses.

Upfront Ventures, one of the most significant venture capital firms in Southern California announced last year it would move from Century City to Downtown Santa Monica. Greycroft, another large VC, is already here.

“They will pay a premium for certain spaces,” Starr said of these VCs. “They have the luxury. They can afford it. They’re not trying to start some new startup app where they’re burning through cash, so it’s different.”

Starr himself is an example of the healthy lifespan of a tech-serving business: He’s been here since the late ’80s and rode out the waves of the dot com boom and bust. He watched tech companies rise then fall and now he’s showing their vacant spaces to the next wave of entrepreneurs.

One trend that Starr believes in is group workspaces.

Mike Jones worked as the CEO of Myspace in Beverly Hills and started a couple companies in Santa Monica. Now he’s the CEO of SCIENCE Inc., an incubator in Downtown Santa Monica. Incubators provide, among other things, space and support for promising baby tech companies.

“We have three floors in our current building and that’s been giving us plenty of room to grow, and in addition to that many of the businesses we help build, when they get to scale, they go off and find their own offices,” Jones said. “Dollar Shave Club set up an office in Venice and DogVacay set up an independent office in Santa Monica. They all continue to remain on the Westside and I have nothing to indicate that they will be leaving those cities.”

Over at General Assembly, student programmers show off their final projects. For many, this is their last step before they enter the tech startup world.

General Assembly is like a university for tech startups. They have a 6,500-square-foot campus, more than 65 full-time learners enrolled in 10 to 12-week programs, and bustling evening classes.

The classes are taught by successful members of the local tech community, said Sarah Tilton, former manager of General Assemblies Santa Monica campus and current head of the company’s global campus sales and marketing. The teachers see the classes as a way to build the community, she said.

“They really do this because they understand that one of the biggest needs in the community is scaling yourself when you’re a technical talent in a city like Santa Monica or New York,” she said. “It’s just giving back and creating the next wave of talent to help other companies grow.”

General Assembly has campuses all over the world but Santa Monica, which opened in October of 2012, was their fourth.

Launchpad, a local accelerator, which provides, among other things, funding and mentoring to selected startups, wooed General Assembly, Tilton said. Santa Monica had always been on their list, she said, but Launchpad’s insistence pushed it to the top.

“They reached out and said: ‘We have so many great incubators and funds that are supporting startups and so many cool companies that are only a few blocks from us and the VCs are right down the street,'” Tilton said, “‘but for our companies and for the people we meet the biggest issue is really talent and we think that a training program like yours could be a great fit.'”

Two graduates went on to build a plug-in that makes digital footage look grainy and old. Others have been offered roles at YouTube media companies and mobile dating apps in the area.

MuckerLab is an accelerator based in Downtown Santa Monica that’s had 18 graduates, all 18 of which have been funded, raising collectively over $40 million.

Even in digital age, location is important, said Will Hsu, MuckerLab’s co-founder.

“I think what people underestimate is the chaos and the randomness of the proximity of being close to each other,” he said. “You can walk down the street and go to a coffee shop and run into a couple guys that are in the same business and either get a conversation going or created impetus for another meeting.”

The lack of large nearby VCs is less of a problem for Santa Monica than it is in other regions because its close proximity to the Bay Area, where there are more than a hundred.

“It’s only an hour away on a plane and it’s on the same time zone,” he said. “The communities are getting tighter and tighter together. It’s not as isolated as it was before.”

Taryn Langer, co-founder of Moxie Communications, said the symbiotic relationship between her public relations firm and the tech startups they serve, is visible in their growth.

“Our business has grown right alongside their businesses,” she said. “We very much consider Moxie to be in the same vein as a tech startup in that sense where were just as agile as and moving just as quickly as they are.”

Langer started the firm in New York City and opened a branch in Santa Monica roughly three years ago. For Langer’s business, growth is visible in the new tech conferences that are coming to L.A. and the national publications that are starting to staff tech reporters in Southern California.

Unlike some of the other ancillary businesses, Moxie grows as the industry grows. They now have six employees in Southern California and recently experienced a common problem for startups in Santa Monica: They ran out of office space and moved to Venice.

“I see a lot of the companies moving toward Venice and Culver City,” Langer said. “We have clients in Hollywood but to me I see the new companies coming in or continuing to stay right around Santa Monica.